VW's top U.S. executive leaves amid diesel scandal

Michael Horn, CEO of Volkswagen Group of America, is leaving the company six months after the automaker admitted to rigging U.S. diesel-emissions tests.

Horn, 54, is departing “by mutual agreement” to pursue other interests, effective immediately, VW said in a statement Wednesday. He will be replaced on an interim basis by Hinrich Woebcken, who on April 1 will take over as head of VW’s North American region.

During VW's initial response to its emissions scandal crisis, Horn was VW's public face in the United States, apologizing days after the scandal became public and testifying before Congress.

"Let's be clear about this: our company was dishonest - with the EPA and the California Air Resources Board - and with all of you. We totally screwed up. We must fix those cars," Horn said on Sept. 21.

In October, Horn told a U.S. House of Representatives panel that VW's supervisory board and top leadership did not intentionally order the cheating, but said it was the work of a few individuals.

Asked if it made sense that a company like VW could allow a fraud to go on for seven years without top leaders knowing, Horn was blunt. "I agree it is very hard to believe," he said. "Some people made the wrong decisions."

Horn strongly denied he was aware of the emissions violations and use of illegal software, and attributed the practice to a “couple of software engineers who put this in for whatever reason.”

Horn’s exit comes amid slumping U.S. sales for the VW brand and continued struggles to reach a deal with U.S. environmental regulators for fixes to some 600,000 VW Group vehicles fitted with illegal emissions-masking software.

Horn, a more than 25-year VW veteran, assumed the automaker’s top U.S. post in January 2014 and has since earned a reputation as a straight-talker, even when it meant acknowledging VW’s past mistakes in the U.S.

Horn sent an email to employees thanking them for supporting him and for pulling together during the crisis. His candor, style and focus on improving dealer profits won him the broad respect among VW’s U.S. retailers.

The VW dealer council in a statement called Horn's departure "a serious blow to the U.S. dealer network, the employees of Volkswagen of America, the workers at the Volkswagen plant in Chattanooga, and the entire Volkswagen community."

It added that the "change in management can only serve to put the company at more risk, not less."

Rebecca Lindland, senior analyst for auto researcher Kelley Blue Book, said: "People know this scandal was rooted in Germany, which is why this is so surprising. In terms of scapegoats, there are other goats out there who would have been better" to take the fall."

Dealer council members praised Horn’s leadership while blasting the “continued mismanagement” of the diesel scandal, saying they were “deeply concerned” about the leadership change.

"There is no sense of a resolution to the diesel scandal,” the dealer council said. “We are troubled watching the mismanagement of this scandal from Germany, and how it may impact the ultimate decisions by the authorities in the United States. This change in management can only serve to put the company at more risk, not less.”

Other job offers

Alan Brown, general manager of Hendrick Volkswagen in Frisco, Texas who is president of the National Volkswagen Dealer Advisory Council, praised Horn's tenure at VW and said he had talked to Horn over the last three days about his departure. Brown told Reuters that Horn had been offered other jobs at Volkswagen outside the United States, but declined to take them.

Brown said it was critical VW maintain the strategy of growing U.S. volume and noted dealers have strongly supported the automaker through the crisis. "We are not working out of gas stations any more," Brown said, noting VW's about U.S. 650 dealers have invested $1 billion over the last decade in facilities.

Brown is flying to Germany on Sunday and staying through Wednesday for meetings with VW executives in the aftermath of Horn's departure.

Brown said it was important VW stick with the business plan it approved to expand U.S. sales by quickly refreshing and redesigning vehicles.

U.S. VW dealers "don't want a handout. They want a chance to win," Brown said. He said VW should scrap the idea of positioning itself as a "near premium brand" and return to its roots in the 1960s of selling mass market vehicles like the iconic Beetle.

Dennis Gaudet, a New Hampshire VW dealer, said Horn was "probably the most popular (head) we've had as long as I've been a dealer" and added he knew the American market "better than most."

Horn joined VW in 1990 and held a series of jobs, including VW sales for Europe, before he became CEO based at VW's U.S. headquarters in Herndon, Virginia following the resignation of his predecessor, Jonathan Browning who abruptly resigned after VW brand sales fell in 2013.

Sales fell despite an aggressive plan announced in 2008 by VW to triple sales in 10 years. VW brand U.S. sales are down 14 percent this year after falling 5 percent last year. VW still faces a stop sale in the U.S. on all new diesel vehicles.

Emissions scandal fallout

Horn's departure comes as VW continues to negotiate with the U.S. Justice Department and California on possible fixes or buybacks for the diesel vehicles.

A federal judge has given the company a March 24 deadline to come up with a fix acceptable to U.S. and California regulators.

A top California official told state lawmakers Tuesday that VW may only be able to mount a partial fix and may have to pay to mitigate the harm caused by allowing vehicles to remain on the road.

The Justice Department sued VW in January seeking up to $46 billion for violating environmental regulations and sent VW a civil subpoena under a bank fraud law.

On Sept. 18, 2015, VW admitted to EPA charges that the automaker had installed devices on 482,000 diesel vehicles in the U.S. that allowed them to spew excess emissions. The disclosure led to the resignation of VW CEO Martin Winterkorn in Germany and other executives. Just this week, Winterkorn’s successor, Matthias Mueller, said the scandal will inflict "substantial and painful" financial damage on the company, a toll that won’t be fully measured for years.